Tokens & Stablecoins
Fungible tokens, standards, and coins that hold their value.
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Lesson map
Tokens are contracts
Most tokens aren't separate blockchains - they're smart contracts that keep a ledger of who owns how much. On Ethereum, fungible tokens follow the ERC-20 standard, so any wallet or app knows how to read balances and transfers.
Standardization is why a brand-new token works instantly in existing wallets and exchanges.
Stablecoins
A stablecoin is a token engineered to stay near a fixed value - usually one US dollar. Some are backed by real dollars held in reserve; others use crypto collateral or algorithms to hold the peg.
They let people move dollar-like value on-chain and are the settlement layer for much of DeFi. But 'stable' depends entirely on the backing being real and sufficient - pegs have broken before.
Remember
Not all stablecoins are equal. Always check what backs the peg and who can freeze or redeem it.
Self-check
Check your understanding
Try each question before opening the answer.
What is an ERC-20 token, technically?
- A.Its own blockchain
- B.A smart contract that tracks balances following a shared standard
- C.A hardware wallet
- D.A mining rig
Reveal answer
B. A smart contract that tracks balances following a shared standard
ERC-20 tokens are smart contracts implementing a common interface, so wallets and apps can use them interchangeably.
What makes a stablecoin 'stable'?
- A.It never trades
- B.It's designed to hold a fixed value, usually via reserves or algorithms
- C.It's guaranteed by a government
- D.It can't be transferred
Reveal answer
B. It's designed to hold a fixed value, usually via reserves or algorithms
Stablecoins aim to hold a peg (often $1) through reserves, collateral, or algorithms - but the backing must actually hold up.
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